Learn more about Oregon’s H.B.2001 bill and how it will affect rent pricing. Why is this an attractive opportunity for entrepreneurial investors?
Scott Muzuca, Portland Property Manager for Mynd, says a lot of development gets stifled because of the “not in my backyard” attitude.
People in single family home areas are typically opposed to multi-family complexes existing in their neighborhood. Oregon is the first state to issue a bill that has eliminated single family housing zoning state-wide. This bill does have some stipulations like you have to be a city with a population of 10,000 or greater for the bill to affect the area, but it does apply to most of Oregon.
How will H.B. 2001 effect pricing and affordability?
This bill can be good or bad depending on how you position yourself as an investor.
When investors are looking at an investment property, they are looking for the highest and best use. When single-family zoning was in place, that was set for you. Highest and best use meant you put as much home on a piece of property as the neighborhood or rules allowed. Some neighborhoods were redeveloped by replacing an old house with a larger mansion.
Now the opportunities have increased. The land has been rezoned to allow more than just a single-family home.
This bill addresses what they're calling the missing middle. We have a lot of single-family homes and apartments, but there's isn’t a lot of development in the middle (Duplexes, Triplex, and Fourplexes).
This bill favors density, and they want the result to be an increase in housing supply and choice. If you own a big enough piece of property, you could do what they're calling a cottage cluster and build three or four little tiny homes that are 400 square feet.
How will this affect the pricing structure of rents
What you can expect to receive rent-wise from one rental house versus a multi-family unit on the same 1 acre of land shows you the potential increase in your investment. That could be a significant increase in potential rent for your acre of land.
As the supply increases, you will probably see the impact on rental rates. You may have to lower what your rent is to compete, but overall, you may see an increase in value because you have 2, 3,or 4 rental properties instead of 1 on your land.
Solving the housing scarcity issue in Oregon
In the Portland metro area, there is a housing scarcity, and this bill encourages a welcomed increase in supply. If you are in a market where you're seeing an oversupply, that could affect your investments. You will want to know which cities have the better potential.
As an investor, what you do worry about with housing bill 2001 is the “not in my backyard” from an owner in a nice single-family neighborhood that starts to see his neighbors putting in little cottages. Suddenly the parking gets out of control, and now there are lower income homes in your neighborhood. This could cause the appreciation value to go down as a result.
As a Real Estate Investor or Owner, What Does the H.B. 2001 Bill Mean for Me in Portland OR?
How does H.B. 2001 impact investors and property owners in Oregon?
Now the investor that owns five or less properties can play in the same game that was previously reserved for the larger, well-funded investors. The larger investors would take a big piece of land zoned for high density and build a lot of units that create significant value. They could get a chunk of land rezoned and overnight create wealth because now the land’s highest and best use was dramatically changed.
This bill has effectively rezoned the whole state of Oregon.
Single-family housing zoning has now been eliminated. The one home per piece of land limit is now gone.
Now you can add an addition to your home and rent it out through Airbnb. You could have a smaller home on the property for Grandma or another family member. Apiece of land may be worth more as an apartment complex or fourplex.
If you live in a single-family home, does that now mean somebody can come along and put an apartment complex or a commercial strip mall next to the house? There is still zoning against that. There are also limits on density on a lot. Currently you can only put 4 homes per acre.
In most cases if you have a seven or eight thousand square foot lot, there’s not going to be room for more than two homes. You are going to see a lot of tiny homes sprinkled in, but that adds a lot of value as an investor as you may be doubling your income. This can be viewed as a win-win situation as renters are going to have a variety in housing choices they may not have had in the past.
When you're looking for a rental property to purchase, make sure you're in the right school district.Tenants with families will be more interested in the areas with good schools. Your local Oregon property manager knows the area well and can help you find an investment property in a popular area.
How Can Real Estate Investors Find Opportunities Coming from the H.B. 2001 Bill?
The H.B. 2001 is a follow up to Senate bill 608. Oregon was one of the first states to pass a state-wide rent control bill. This year the rent control is a 10% increase, so it isn’t really restrictive. Rent controls are typically put in place when there is a housing shortage. The H.B. 2001 seems to be geared to helping ease the housing shortage by increasing the supply.
This opens the doors for investors to go into the Oregon market and make a lot of money.
As people see the opportunity, it is possible this could drive prices up.
Is there a negative side from an investor’s perspective?
You want to be on guard as an investor. There are always going to be a few potential negatives such as an increase in density causing parking issues. However, if you have the right eye for finding the opportunities to make the highest and best use of a property, the Oregon market could be a fantastic investment option.
Is Oregon an attractive market for investors?
Scott Muzuca’s conclusion on H.B. 2001 is that it will benefit the entrepreneurial investor, and Steve believes this is going to put Oregon on the map for investors that are looking for these types of strategies.
Looking for an Oregon property manager?
They know the area and the rental market. If you are interested in finding out what cities to invest in or if you need property management in Oregon, reach out to Scott Muzuca at Mynd property management.